Morgan Stanley revided down AUD forecast

Analysts at Morgan Stanley revised down forecasts for AUD/USD. In June the bank expected Australian dollar to rise to $1.0000 by the year end amid demand for high-yielding AAA bonds. Last month they lowered their forecast to $0.9500 and this month – to $0.8400.

The currency will drop as demand for Australian sovereign debt wanes amid higher US yields and market volatility. In addition, the price of iron ore, Australia’s chief export earner, fell by 40% this year. Moreover, there signs that signs import demand from China may slow as authorities there resist wide-spread stimulus to spur economic growth.

The median forecast of analysts surveyed by Bloomberg shows that AUD/USD will trade at $0.9000 on Dec. 31 and then slid to $0.8600 in a year.